Determinants of bank branch density: a case study of Slovakia

Abstract

Purpose

This paper studies the density of bank branches in districts of Slovakia and aims to identify determinants that explain or justify districtural differences in the density of bank branches.

Design/methodology/approach

Bank branch density is measured by the number of branches in a district, and banks are further differentiated by size and profile. Potential determinants of bank branch density are sought through univariate and bivariate Poisson regressions amongst economic factors, socioeconomic factors, technological factors, urbanization factors, and branch market concentration.

Findings

Using data from 2016, it has been found that branch numbers in districts are determined chiefly by five factors that describe their economic development, population size with its characteristics, and existent branch concentration. The spatial distribution of bank branches in the territory of Slovakia is not random, but is found to be affected by environmental factors measurable at the districtural level. Only 22 Slovak districts representing administrative or economic centers are expected to be over-branched.

Practical implications

The study helps to identify factors that need be accounted for in planning and redesigning of branch networks or in implementing mergers and acquisitions on a bank level. The results are also useful in regional policy and regulatory oversight.

Originality/value

The present study is unique since the decision-making processes of Slovak commercial banks in planning the location and density of their branch networks have not been rationalized and researched as of yet.

Citation

Boďa, M. and Čunderlíková, K. (2020), "Determinants of bank branch density: a case study of Slovakia", International Journal of Bank Marketing, Vol. 38 No. 4, pp. 933-959. https://doi.org/10.1108/IJBM-07-2019-0267